Smoke Screens and Slot Machines: Berks DA Calls for PA Legislative Action on Unregulated Gambling Devices

Posted on September 17, 2020 - Last Updated on October 29, 2020

Enforcement of Pennsylvania law when it comes to gambling devices outside casinos ranges from sporadic and scattershot to nonexistent.

That means there are tens of thousands of unregulated, unlicensed and untaxed gambling devices across the Quaker State. Those machines are competing for dollars with the heavily regulated and taxed legal gambling industry.

A cloud — smoke screen might be more accurate — has allowed the devices to populate Pennsylvania like toxic toadstools.

And that’s the bigger issue, according to Berks County District Attorney John Adams.

Legal smoke screen for illegal gambling devices

The DA spoke exclusively to PlayPennsylvania earlier this week. In Adams’ view, the PA Legislature’s “complacency on acting on this issue” is now the real problem facing the commonwealth:

“Their complacency on acting on this issue is a disservice to businesses and to the revenue source which could help the commonwealth. Limbo is causing a monumental problem. To sweep this aside is not doing their duty. … It is time for the Legislature to act, not to kick the can down the road.”

Adams says the confusion over the devices’ legality largely stems from a single 2014 court ruling, a ruling that has created a lingering legal smoke bomb.

PA Legislature faulted

But he adamantly contends that the bulk of the problem is the complete failure of the Pennsylvania Legislature.

Adams believes politicians have not done their jobs. He says they should have passed laws leading the state out of the haze by creating clear legislative guidelines.

I think he’s right.

But instead, the PA Legislature has simply waffled.

Some lawmakers are pushing to regulate and tax the devices and make them expressly legal. Others are looking to ban them.

Legal ruling became a large fig leaf for all devices

The Beaver County Common Pleas Court six years ago found that an element of skill was necessary to win the three games found on one seized device taken from a social club in Aliquippa, an economically pinched former steel mill town in Beaver County, near Pittsburgh.

The trial court also ruled that the skill element meant the games in question were therefore not games of chance, such as the licensed slots in casinos or the regulated VGTs — video gaming terminals — installed at some approved truck stops.

However, the court did not address the fact that the only approved machines licensed as casino slot games, and more recently VGTs licensed at truck stops, are considered legal under state gaming laws.

Also, the ruling involved exactly one style of wagering machine — a particular model of a device known as Pennsylvania Skill. These games have a single distributor, Miele Manufacturing of Williamsport, which also goes by Pace-O-Matic, or POM of Pennsylvania. POM makes the machines using proprietary software from Pace-O-Matic in Georgia.

And then there is this seldom-discussed nuance: The outcomes of the skills games are based on coded software. Changing the software arguably means the game has changed. The court did not address how changing the coding could change its approval of the device.

Injunction led to the spread of devices

With that favorable court ruling, Pennsylvania Skills sought and was granted a temporary injunction preventing the seizure of its machines, a task that primarily had fallen to the PA State Police.

But the unintended consequence of the muddied message conveyed by the injunction was that all manner of gambling devices proliferated across PA.

More than 15,000 and perhaps as many as 20,000 unregulated and untaxed devices are scattered throughout the state in gas stations, bars, convenience stores, fraternal organizations, pizza shops and even strip mall arcades. On the other hand, there are 24,000 slot machines in casinos. The state regulates them and taxes them heavily.

Devices labeled slot machines and injunction lifted

A court in November 2019 labeled skill games as slot machines. Then the enforcement injunction was lifted in January 2020.

Casino forces and manufacturers catering to casinos united in February to target the machines, attempting to clarify what is legal and what is not. A flurry of State Police enforcement actions also happened in February.

All of that finally prompted the Pennsylvania Gaming Control Board (PGCB) to get off the sidelines and definitively call the POM machines illegal slot machines under the state’s gaming laws.

But then PA Attorney General Josh Shapiro further increased the ambiguity surrounding the unlicensed machines.

The state’s top law enforcement officer quietly shelved his office’s enforcement efforts against gambling devices outside casinos earlier this year. Instead, Shapiro has decided to await either a court or legislative action.

Even now, six years down the road, the Beaver County court ruling remains under review in higher courts.

Legal mumbo-jumbo and confusion

All of which has resulted in a landscape of murky legal mumbo-jumbo and confusion, and a law enforcement bureaucracy too timid to act.

But not in every case.

Working in tandem with PA State Police, Berks DA detectives recently shut down an illegal, unlicensed slot casino in tiny Kenhorst Borough near Reading. At the 777 Casino in a strip mall, $67,768 in cash and 57 unlicensed machines were seized. An investigation continues, and charges are pending.

Clear guidance is hard to come by

Strangely, local authorities had signed off on the operation, which had opened last December.

But underscoring the legal murk, Kenhorst had submitted a letter seeking guidance and an investigation by PA gaming regulators in late December.

The letter, sent via Regular US Mail on Dec. 26, went unanswered, according to Kenhorst’s lawyer Jill E. Nagy.

And while a spokesman for the PGCB declined to comment, the board has made it clear previously that its jurisdiction only pertains to matters of legal gambling and that it is not authorized to investigate gambling operations outside casinos or other regulated gaming facilities.

That would imply that such a letter or complaint should be addressed to the State Police or local law enforcement.

While we have no confirmation of who actually saw the letter, Adams thinks it should have found its way into the right hands.

“They absolutely should have passed that letter to the State Police,” the DA said.

A State Police spokesman declined to comment. And so did Kenhorst’s lawyer, though she did provide the letter.

Legislative laissez-faire

All of this further muddies the question of which entities are in charge of investigation of and enforcement against unregulated devices.

Adams finds it particularly troubling that not a single PA legislative member has spoken to him since the raid on the illegal casino.

“Call me. Tell them to call me!” he said.

Elbows out on both sides

And while no legislative action has become law, casinos and POM are readying elbows as the PA budget season looms.

As it has previously, POM continues to try to distinguish itself from other wagering devices commonly found outside of regulated casinos in PA.

First, it held a press conference to showily point to a strip mall in Lancaster County that appears to be filled with unlicensed gambling devices, operated as Largo, at 3071 Columbia Ave. in West Hempfield Township.

A state lawmaker had complained about the location eight years ago, with no apparent legal action taken.

POM, which employs Tom Marino, a former U.S. Attorney and former member of Congress, delivered a packet of information to Lancaster DA Heather L. Adams. She took office in January. A spokesman said the information and any past actions by the office are under review. POM presser images follow:

POM holds a press conference in Harrisburg

POM followed that up with a livestreamed press conference — with just three viewers — on Wednesday from the state capitol Rotunda, again trying to set its machines apart from other devices.

The family-owned company presented several supporters. They included two legislators, a charity leader and a member of a nonprofit service organization, all calling for “regulation and clarity in the law.”

POM continues campaign outing competitors with unlicensed devices

Updated Sept. 18: In Minersville, Schuylkill County, POM on Thursday again pointed to what appears to be an illegal unlicensed slot operation, this one known as Spin City, according to a local Fox channel.

As before, POM forwarded information about the location to the local DA’s office. The DA had no immediate comment.

The operator, co-owner Jeff Bilansky, said that POM had turned them down and that’s why they had placed other machines at the site.

Mike Barley, a spokesman for POM, said earlier in the week that his company will not do business with an arcade-style location.

Casino response like herding cats

Meanwhile, Pete Shelly, the spokesman for Pennsylvanians Against Illegal Gambling, said licensed casinos have drafted a letter opposing any legalization of any new devices. But not all 12 retail casinos have yet signed off on the language.

He said any move to legalize and license the devices operating outside casinos and truck stops would simply be “rewarding bad behavior which is killing the lottery.”

He also pointed to billions invested in casinos, the employment of more than 20,000 people and the tax revenue generated.

“It doesn’t matter what name is on the machine. They are illegal,” said Shelly. And they should all be taken out of service, he added.

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Kevin Shelly

Kevin C. Shelly is an award-winning career journalist who has spent most of his career in South Jersey. He's the former assistant city editor of The Press of Atlantic City, where he covered the casino industry and Atlantic City government as a reporter. He was also an investigative, narrative enterprise, and features reporter for Gannett’s Courier-Post.

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